According the Mr. Practical at Minyanville, "World-wide central banks injected $383 billion in credit to the world’s banks just in August. That is just an amazing number. It is unprecedented."
Of course, Mr. Practical is right. World central banks are in a precarious position. All of this money sloshing around is likely to find some places to blow up, and the most likely places are in the US and Great Britain, where the excesses and risk-taking have been phenomenal.
What does this all mean? According to Mr. Practical (and I've noted this as well), the stock markets have seized up and are being kept afloat by the unprecedented infusions of capital from central banks, who may, when this all unravels, face one of two conditions: 1. their own bankruptcy (highly probable in the US), or 2. Ownership of vast portfolios of stocks (the end of free markets).
Neither of these conditions is desirable. Worth noting is yesterday's move by the Senate Finance Committee to raise the debt limit to nearly $10 trillion. So, maybe the federal government will buy up most of Wall Street's troubled stocks with debt, sell it to China and thus avert a bloody war by allowing foreigners to take over all US assets without firing a single shot. That's a very nifty strategy by our nitwit Congress and sly fox administration, though overtly treasonous. They should all be in jail.
Interestingly, today's outsize market gains were led by two of the most debt-ridden companies on the planet, General Motors (GM) and Countrywide Financial (CFC). GM was up 10% on news that UAW president, Ron Gettelfinger, agrees in principle to the creation of a multibillion-dollar health-care trust fund. Countrywide was up 13% on news of another round of emergency funding, to the tune of $12 billion. Neither the names of the creditors nor the terms of the loan were disclosed.
Dow 13,424.88 +133.23; NASDAQ 2,601.06 +8.99; S&P 500 1,483.95 +12.39; NYSE Composite 9,678.12 +79.39
Technology, located mostly in the NASDAQ, lagged the market badly as the Dow Jones Industrials led the way. As large as the gains may have seemed, the breath of the market was rather thin. Advancers held a 5-4 margin over declining issues. New lows continued to lead new highs, 207-155. The fundamentals of this market still are not positive despite a couple of solid sessions this week.
Keeping some perspective, oil was up only 18 cents, though it cracked a new all-time high, closing at $80.09. The gold rally has stalled for the time being, with the yellow stuff down $2.80 to $717.90. Silver eased 11 cents to $12.68. If you're looking to bet on the metals, silver is well undervalued in relation to cousin gold, though price pressures from manufacturers could have some say in keeping the price down for now. It's still a very solid hedge position at current levels and I wouldn't chide anyone buying at any price under $13.25.
It also should be pointed out that trading was light on major exchanges. Key events to keep in mind are tomorrow's nationwide stand down by the Air Command and Tuesday's Fed meeting. There may be major news on the political front stemming from tensions in the Middle East, which have reached a boiling point not only on Capitol Hill, but throughout the region.
Thursday, September 13, 2007
Wednesday, September 12, 2007
No Truth and Fewer Consequences
The markets bounced around the flatline in a day which ended up being of little real consequence.
Dow 13,291.65 -16.74; NASDAQ 2,592.07 -5.40; S&P 500 1,471.56 +0.07; NYSE Composite 9,598.73 +1.12
Losing issues outnumbered winners by a 4-3 margin and new lows defeated new highs, 201-158. The song remains the same. The markets are weak and the trend is lower.
The real action was away from Wall Street, in the oil bourses and at various press conferences. First, oil jumped another $1.68 to $79.91 on - the usual suspect - supply concerns. It's gotten to be such a ridiculous song and dance that there really doesn't need to be a reason, only knowledge that the price is higher.
Oil companies are raking in obscene profits, sheiks and sultans are rolling in cash and the US dollar is crumbling. Without any semblance of leadership in Washington, consumers in the US, and to a degree, around the world, are being raped by higher prices for gas, home heating fuel, jet fuel and just about anything else that involves petroleum. It's a death spin of global magnitude which will eventually price everyone out and send economies everywhere into dizzying tailspins.
Couple high prices with the strained credit markets - now being soothed by Fed-speak and talks between Treasury Secretary Hank Paulson and heads of beleaguered finance companies such as Countrywide Financial - and you have a strangulation effect on the middle class and a morass at the center of global finance.
The remaining mortgage financiers are going to be bailed out by the government, as are a slew of undeserving homeowners who got into bad deals with no money down and could as well understand the terms of their loans as practice brain surgery. For those who have already hit the skids, too bad. It's a horrid solution to a real problem and quite unfair to many parties. One speculator was heard saying, "we have free markets only until there's a problem that needs the government."
Therein lies the rub. The real bailout is for banks, mortgage firms and credit card issuers. Homeowners and consumers will still be on the hook, only for a longer period and at a slightly lower interest rate. It's oligarchy at the extreme.
Gold and silver took a breather, both registering marginal losses. With the Yom Kippur holiday beginning, the next three trading days - through Monday - will experience a slowdown of activity.
Stay tuned. There are fireworks yet to come. The credit crisis hasn't fully blown out and oil prices haven't yet stopped rising. The world needs a savior. Is there one out there?
Dow 13,291.65 -16.74; NASDAQ 2,592.07 -5.40; S&P 500 1,471.56 +0.07; NYSE Composite 9,598.73 +1.12
Losing issues outnumbered winners by a 4-3 margin and new lows defeated new highs, 201-158. The song remains the same. The markets are weak and the trend is lower.
The real action was away from Wall Street, in the oil bourses and at various press conferences. First, oil jumped another $1.68 to $79.91 on - the usual suspect - supply concerns. It's gotten to be such a ridiculous song and dance that there really doesn't need to be a reason, only knowledge that the price is higher.
Oil companies are raking in obscene profits, sheiks and sultans are rolling in cash and the US dollar is crumbling. Without any semblance of leadership in Washington, consumers in the US, and to a degree, around the world, are being raped by higher prices for gas, home heating fuel, jet fuel and just about anything else that involves petroleum. It's a death spin of global magnitude which will eventually price everyone out and send economies everywhere into dizzying tailspins.
Couple high prices with the strained credit markets - now being soothed by Fed-speak and talks between Treasury Secretary Hank Paulson and heads of beleaguered finance companies such as Countrywide Financial - and you have a strangulation effect on the middle class and a morass at the center of global finance.
The remaining mortgage financiers are going to be bailed out by the government, as are a slew of undeserving homeowners who got into bad deals with no money down and could as well understand the terms of their loans as practice brain surgery. For those who have already hit the skids, too bad. It's a horrid solution to a real problem and quite unfair to many parties. One speculator was heard saying, "we have free markets only until there's a problem that needs the government."
Therein lies the rub. The real bailout is for banks, mortgage firms and credit card issuers. Homeowners and consumers will still be on the hook, only for a longer period and at a slightly lower interest rate. It's oligarchy at the extreme.
Gold and silver took a breather, both registering marginal losses. With the Yom Kippur holiday beginning, the next three trading days - through Monday - will experience a slowdown of activity.
Stay tuned. There are fireworks yet to come. The credit crisis hasn't fully blown out and oil prices haven't yet stopped rising. The world needs a savior. Is there one out there?
Tuesday, September 11, 2007
Another Injection, Please
To commemorate the 6th anniversary of one of America's worst man-made disasters, the Fed and friends decided to pump more capital into the strained and strangled US equity markets. How much? The NY Fed offered up $34.9 billion, but only $3.5 billions was actually accepted and put to use. $2.365 billion of that was mortgage backed.
Turned out that it was more than enough as the markets percolated higher on moderate volume - better than most of the past two weeks' sessions - and closed with healthy gains.
The Fed loves this stuff, and of course, we couldn't be seen as weak on the anniversary of the 9/11 bedlam. Chairman Bernanke gave a speech today and said nothing about lowering the key Federal Funds rate for which Wall Street has been clamoring.
With the FOMC meeting just a week away, the market expects the Fed to lower the rate from 5.25% to a flat 5 percent or even 4.75%. Market players and analysts might as well be whistling Dixie because the Fed sees no absolute reason to do so and probably won't.
Dow 13,308.39 +180.54; NASDAQ 2,597.47 +38.36; S&P 500 1,471.49 +19.79; NYSE Composite 9,597.61 +139.97
Advancing issues overleapt decliners by a 5-2 margin, though the enormous updraft in stocks failed to loosen the grip of new lows over new highs. There were 188 stocks hitting 52-week lows, as compared to just 127 new highs.
These internal figures suggest either that today's gains were mostly short-covering or illusory and that more technical damage has been done in the markets than a one-day wonder is going to erase.
Crude oil rose 74 cents to an all-time high of $78.23 after OPEC agreed to boost its crude output by half a million barrels a day. Apparently, an imminent increase in supply turns classical economy on its head in oil markets. Prices should go lower instead of higher on supply increases. This fully completes the separation from reality in the oil markets.
What was probably more important to oil traders was the further erosion of the US dollar, which hit an all-time low against the Euro. With that, gold shot up $8.90 to $721.10, with silver tagging along, up 14 cents to $12.84.
This is exactly what the Fed doesn't want. Further deterioration of the greenback, which lower rates will encourage, will send inflation through the roof.
So, the question for Ben Bernanke is, which would you prefer, inflation or recession? Most are betting that the Chairman will opt for inflation. We'll see how disciplined a man this capitalist really is in a week (Hint: he should not lower rates).
Turned out that it was more than enough as the markets percolated higher on moderate volume - better than most of the past two weeks' sessions - and closed with healthy gains.
The Fed loves this stuff, and of course, we couldn't be seen as weak on the anniversary of the 9/11 bedlam. Chairman Bernanke gave a speech today and said nothing about lowering the key Federal Funds rate for which Wall Street has been clamoring.
With the FOMC meeting just a week away, the market expects the Fed to lower the rate from 5.25% to a flat 5 percent or even 4.75%. Market players and analysts might as well be whistling Dixie because the Fed sees no absolute reason to do so and probably won't.
Dow 13,308.39 +180.54; NASDAQ 2,597.47 +38.36; S&P 500 1,471.49 +19.79; NYSE Composite 9,597.61 +139.97
Advancing issues overleapt decliners by a 5-2 margin, though the enormous updraft in stocks failed to loosen the grip of new lows over new highs. There were 188 stocks hitting 52-week lows, as compared to just 127 new highs.
These internal figures suggest either that today's gains were mostly short-covering or illusory and that more technical damage has been done in the markets than a one-day wonder is going to erase.
Crude oil rose 74 cents to an all-time high of $78.23 after OPEC agreed to boost its crude output by half a million barrels a day. Apparently, an imminent increase in supply turns classical economy on its head in oil markets. Prices should go lower instead of higher on supply increases. This fully completes the separation from reality in the oil markets.
What was probably more important to oil traders was the further erosion of the US dollar, which hit an all-time low against the Euro. With that, gold shot up $8.90 to $721.10, with silver tagging along, up 14 cents to $12.84.
This is exactly what the Fed doesn't want. Further deterioration of the greenback, which lower rates will encourage, will send inflation through the roof.
So, the question for Ben Bernanke is, which would you prefer, inflation or recession? Most are betting that the Chairman will opt for inflation. We'll see how disciplined a man this capitalist really is in a week (Hint: he should not lower rates).
Monday, September 10, 2007
Market a fickle friend
Monday's market movements were more of the same, with a zig-zag pattern ending slightly on the up side for most of the indices. In particular, the Dow was up on the open, traded 80 points lower just before noon, slowly moved to the highs of the day after 3:00 and faded badly into the close.
One trader was heard to say, "this is like my wife. I never know when her mood will change." And so it is in this most fickle, direction-less market in recent memory. After being hammered lower mid-August, it's been sideways ever since.
Much of today's gain was likely the cause of covert manipulation, short covering or butt-saving, since, with volume so dismally low, the only people trading are Wall Street hot shots and hedge fund managers.
The S&P came dangerously close to support, hitting a low of 1439, and that's precisely when the trade reversed course. The big money doesn't want a meltdown, even though world markets are dangerously close, and buyers stepped in today to avoid collapse. Major European markets all closed lower, with the credit squeeze becoming front page news in Great Britain as the Bank of England on Friday was forced to make statements similar to our own Fed's, that they would continue to supply liquidity.
Dow 13,127.85 +14.47; NASDAQ 2,559.11 -6.59; S&P 500 1,451.70 -1.85; NYSE Composite 9,457.64 -28.80
Market internals indicated more weakness as declining issues outpaced advancers by better than a 3-2 margin and new lows superseded new highs, 257-92.
Oil priced higher by 78 cents, to $77.49; gold continued its rally, up $2.50 to $712.20, though silver lost 6 cents to finish at $12.70.
The most significant piece of trading information probably came from watching Countrywide Financial (CFC) drop nearly another point on Monday after announcing 12,000 layoffs after the market closed on Friday. Investors are not buying the stock even though the company is making an attempt to reduce costs. Rather, there was widespread selling early on, with institutional holder, AXA, reducing its exposure dramatically. Essentially, Countrywide, the nation's largest mortgage lender, has so much downside risk, that even massive layoffs (25% of their workforce) could not turn it around. The company has so many non-performing loans on its books and no place to sell their new originations that it could face liquidation itself in coming days.
In the spirit of full disclosure, I have a short position via January 20 put options on the stock. I am comfortable that the stock, currently at 17-and-small-change, will hit 12 within a month.
Happy trading.
One trader was heard to say, "this is like my wife. I never know when her mood will change." And so it is in this most fickle, direction-less market in recent memory. After being hammered lower mid-August, it's been sideways ever since.
Much of today's gain was likely the cause of covert manipulation, short covering or butt-saving, since, with volume so dismally low, the only people trading are Wall Street hot shots and hedge fund managers.
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Sooner or later they will run out of witless fools to buy stocks and the markets will dry up completely, much like those serving corporate credit. In some ways, the stock market has already becoming illiquid, especially for low-priced, low volume stocks.The Path of Substantial Wealth and Riches: Your Parents' Influence on Your Finances
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The S&P came dangerously close to support, hitting a low of 1439, and that's precisely when the trade reversed course. The big money doesn't want a meltdown, even though world markets are dangerously close, and buyers stepped in today to avoid collapse. Major European markets all closed lower, with the credit squeeze becoming front page news in Great Britain as the Bank of England on Friday was forced to make statements similar to our own Fed's, that they would continue to supply liquidity.
Dow 13,127.85 +14.47; NASDAQ 2,559.11 -6.59; S&P 500 1,451.70 -1.85; NYSE Composite 9,457.64 -28.80
Market internals indicated more weakness as declining issues outpaced advancers by better than a 3-2 margin and new lows superseded new highs, 257-92.
Oil priced higher by 78 cents, to $77.49; gold continued its rally, up $2.50 to $712.20, though silver lost 6 cents to finish at $12.70.
The most significant piece of trading information probably came from watching Countrywide Financial (CFC) drop nearly another point on Monday after announcing 12,000 layoffs after the market closed on Friday. Investors are not buying the stock even though the company is making an attempt to reduce costs. Rather, there was widespread selling early on, with institutional holder, AXA, reducing its exposure dramatically. Essentially, Countrywide, the nation's largest mortgage lender, has so much downside risk, that even massive layoffs (25% of their workforce) could not turn it around. The company has so many non-performing loans on its books and no place to sell their new originations that it could face liquidation itself in coming days.
In the spirit of full disclosure, I have a short position via January 20 put options on the stock. I am comfortable that the stock, currently at 17-and-small-change, will hit 12 within a month.
Happy trading.
Friday, September 7, 2007
Welcome to the Recession
Stocks were slammed again on Friday after the non-farm employment report showed the nation lost a net 4,000 jobs in the month of August. The consensus opinion was that the report would show a gain of 110,000 jobs. So much for the opinions of so-called experts. About the only thing the assembled group of economists, analysts and forecasters are expert about is being totally, completely and hilariously wrong.
Additionally, the numbers from June and July were adjusted lower, to gains of 69,000 for June and 68,000 from July. Essentially, the total of 133,000 new jobs in the prior three months, does not even come close to keeping pace with growth in the employment sector, as roughly a net of 130,000 persons enter the workforce per month.
So, the question is if employment growth is not keeping pace with the overall size of the workforce, how soon does that shortfall become reflected in GDP and plunge the nation into a recession? Broadly defined as two consecutive quarters of negative real GDP growth, the current employment numbers suggest that the 3rd quarter of 2007 - July, August and September - could show up as a net loss in GDP.
That would be one quarter. If the 4th quarter doesn't show improvement (and there's good reason to believe that this government - which has shown a propensity to lie about just about everything else - will fudge the numbers), we'll officially be in a recession.
It's not that evil a situation. A recession is just an ordinary, orderly slowdown in business activity. Some businesses are affected more than others. Some actually will do better. There will be job losses, lots of whining, more fear-mongering by the government and the press, but most of us will be able to go about our lives without too much bother.
Of course, about 15% of the population will feel real pain, either in the form of a job loss, home loss, pay cut, layoff or other calamitous outcome of poor macro-economic planning. And if the government and private sectors don't respond properly, the recession woes could spread beyond the select group to a broader portion of the society, deepening and widening the pain.
Dow 13,113.38 -249.97; NASDAQ 2,565.70 -48.62; S&P 500 1,453.55 -25.00; NYSE Composite 9,486.44 -151.11
At the heart of all of this is the credit crunch and coming banking scandal brought on by the popping of the housing bubble and the inevitable unwinding of the sub-prime mortgage fiasco. More on banks, financial services and their arcane reporting policies and how this is likely to become the locus of an enormous banking scandal.
In any case, the indices approached confirmation of bear market conditions. For some, today's losses will suffice, though many will wait until the S&P crosses the rubicon of 1430 to the downside or the Dow drops below 12,860, as explained in Wednesday's post. That's where support exists. Upside resistance is now just a dot far off on a distant horizon to which nobody can actually navigate.
Breadth was spectacular, albeit on low volume. Decliners overwhelmed advancing issues by a 4-1 margin. New lows took over from new highs in a large way, 214-67.
The detachment from reality in the world oil markets is nearly consummate, as crude for October delivery rose another 40 cents to $76.70, approaching an all-time record.
It was a short but painful week for investors, as fears of complete financial meltdown reappeared. The Fed may want to lower interest rates at their next meeting, though that alone will not solve the problems created by years of loose credit policy and poor fiscal and monetary management at the top of our system.
Banks, bankers, economists and financiers are mostly to blame. Unfortunately for the rest of us, those same people will be called upon to fix this mess. Americans are in for a continuation of a long, ugly ride down the economic food chain. It's sickening.
Enjoy the weekend. We can set about to fixing this mess on Monday.
Additionally, the numbers from June and July were adjusted lower, to gains of 69,000 for June and 68,000 from July. Essentially, the total of 133,000 new jobs in the prior three months, does not even come close to keeping pace with growth in the employment sector, as roughly a net of 130,000 persons enter the workforce per month.
So, the question is if employment growth is not keeping pace with the overall size of the workforce, how soon does that shortfall become reflected in GDP and plunge the nation into a recession? Broadly defined as two consecutive quarters of negative real GDP growth, the current employment numbers suggest that the 3rd quarter of 2007 - July, August and September - could show up as a net loss in GDP.
That would be one quarter. If the 4th quarter doesn't show improvement (and there's good reason to believe that this government - which has shown a propensity to lie about just about everything else - will fudge the numbers), we'll officially be in a recession.
It's not that evil a situation. A recession is just an ordinary, orderly slowdown in business activity. Some businesses are affected more than others. Some actually will do better. There will be job losses, lots of whining, more fear-mongering by the government and the press, but most of us will be able to go about our lives without too much bother.
Of course, about 15% of the population will feel real pain, either in the form of a job loss, home loss, pay cut, layoff or other calamitous outcome of poor macro-economic planning. And if the government and private sectors don't respond properly, the recession woes could spread beyond the select group to a broader portion of the society, deepening and widening the pain.
Dow 13,113.38 -249.97; NASDAQ 2,565.70 -48.62; S&P 500 1,453.55 -25.00; NYSE Composite 9,486.44 -151.11
At the heart of all of this is the credit crunch and coming banking scandal brought on by the popping of the housing bubble and the inevitable unwinding of the sub-prime mortgage fiasco. More on banks, financial services and their arcane reporting policies and how this is likely to become the locus of an enormous banking scandal.
In any case, the indices approached confirmation of bear market conditions. For some, today's losses will suffice, though many will wait until the S&P crosses the rubicon of 1430 to the downside or the Dow drops below 12,860, as explained in Wednesday's post. That's where support exists. Upside resistance is now just a dot far off on a distant horizon to which nobody can actually navigate.
Breadth was spectacular, albeit on low volume. Decliners overwhelmed advancing issues by a 4-1 margin. New lows took over from new highs in a large way, 214-67.
The detachment from reality in the world oil markets is nearly consummate, as crude for October delivery rose another 40 cents to $76.70, approaching an all-time record.
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Gold rose another $5.10 to $709.70, and silver got a big boost, up 23 cents to $12.76 an ounce.Forex Foreign Currency Exchange Trading Beginner's Resource Center.
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It was a short but painful week for investors, as fears of complete financial meltdown reappeared. The Fed may want to lower interest rates at their next meeting, though that alone will not solve the problems created by years of loose credit policy and poor fiscal and monetary management at the top of our system.
Banks, bankers, economists and financiers are mostly to blame. Unfortunately for the rest of us, those same people will be called upon to fix this mess. Americans are in for a continuation of a long, ugly ride down the economic food chain. It's sickening.
Enjoy the weekend. We can set about to fixing this mess on Monday.
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